Hennessy Advisors, a publicly traded investment manager with $3.2 billion in assets under management, is set to offer its first ETF.
Neil Hennessy, Chairman and CEO of Hennessy Advisors.
The firm announced that it has signed a definitive agreement with Stance Capital and Red Gate Advisers to acquire the Stance Equity ESG Large Cap Core ETF (STNC US).
Listed on NYSE Arca, STNC currently houses $40 million in assets under management.
Upon completion of the transaction, which is expected to be finalized by the end of 2022 subject to regulatory approval, STNC will be reorganized as a series of Hennessy Funds Trust and will be renamed the Hennessy Stance ESG Large Cap ETF.
Current shareholders of the ETF are not expected to recognize any gain or loss for federal income tax purposes as a result of the transaction.
Investment approach
While Hennessy is set to become STNC’s investment advisor, Stance Capital will continue to manage the fund on a day-to-day basis as sub-advisor. Stance is a Boston-based registered investment advisor specializing in quantitative ESG asset management and research.
The ETF provides exposure to a socially responsible portfolio of US large-cap equities. Companies engaged in weapons, tobacco, or thermal coal are ineligible for selection.
Stance identifies companies that successfully manage sustainability‐related key performance indicators (KPIs) such as energy productivity, carbon intensity, water dependence, and waste profile. Additional KPIs relating to governance include the capacity to innovate, unfunded pension fund liabilities, the difference between CEO and worker pay packets, safety performance, employee turnover, leadership diversity, and percentage taxes paid.
From this ESG-screened pool, the ETF selects companies with exposure to fundamental risk factors that are expected to generate alpha. The factors compete for inclusion on an annual basis and are adjusted based on accumulated learning.
STNC utilizes Blue Tractor Group’s ‘Shielded Alpha’ semi-transparent ETF structure to avoid disclosing daily portfolio holdings, thereby immunizing the fund against attempts to front-run or reverse engineer the strategy while maintaining the tax efficiency, liquidity, and lower costs typically associated with ETFs.
Neil Hennessy, Chairman and CEO of Hennessy Advisors, said: “We are excited to undertake this strategic expansion of our business and to partner with the team at Stance Capital. This unique ETF product is consistent with our historical strength of providing our investors with portfolios focused on long-term value while kicking off the next stage of our product evolution into the ETF market. We look forward to welcoming the Stance ETF shareholders, and we are committed to a smooth transition into the Hennessy family of investments.”
Bill Davis, Founder of Stance Capital, added: “The team at Hennessy consistently demonstrates a commitment to their shareholders and the asset management industry. We feel confident our shareholders will continue to receive solid portfolio management, excellent shareholder service, and dedicated trustee guidance.”